Analysis of the Competitive Environment
September 2, 2021
Analysis of the competitive environment
Learn how to analyze your competitors and what to consider.
Cycling races are among the most prestigious competitions for athletes. Taking off shoulder to shoulder, they climb passes and descend mountains in a frenzied fashion. It is true that the longer a race goes on, the thinner the field becomes. A cyclist who is the strongest battles for the front, a cyclist who is mediocre stays in the back, and a weak cyclist give up. Competitive economics is similar.
A company must remain competitive by being more innovative, having more to offer, and exceeding customer expectations than its direct competitors. It is crucial to keep one's head rotating throughout this process. It is the primary purpose of competitive analysis to discover precisely what your competitors are doing.
I. What is a competitor analysis?
An analysis of the competition is an assessment of the strengths and weaknesses of current and potential competitors. This market analysis is the evaluated from the perspective of the customer.
Analyzing the competition:
- Systematically examining the existing and potential competition.
- Provides insight into your strengths and weaknesses, as well as those of your competitors.
- Analyzes future trends and potential threats to your company.
- Analyzes competitors' strategies.
A competitive analysis is a key to identifying your competitors, understanding their strategies, and in due course overtaking them. If you know your weaknesses versus the competition, you can make adjustments accordingly. When you know your strengths, you can build on them, emphasize them, and make your offer unique. Competitive analysis is crucial for a company to remain strategically positioned in the market.
The following situations warrant a competitive analysis:
- Product introductions (Are these new products already on the market? How do consumers receive them?)
- Starting a new company (How would you describe the target market structure?)
- Establishing new target groups (Which consumers choose me, and which consumers tend to choose my competitors?)
- How can my company develop unique and innovative products to offer to customers?
- Study the marketing strategies of your competitors (how do they advertise, and how do they do it?
- Examining recruiting strategies and employer image (What is their hiring strategy, and how satisfied are their employees?)
It requires extensive effort to gain knowledge about competitors. However, it is almost impossible to overtake the competition if you do not know their strategies. By gathering the consumer's opinion on your products, and those of your competitors, you can conduct a competitive analysis. Ultimately, the customer decide whether a product or service is successful.
A buyer decides whether to stick with a particular brand or go with the competition. It's essential to reach consumers directly for competitive analysis, so surveys serve as a crucial component. All potential customers that might fit into your target group - not just those who are already customers of your company. From a consumer's point of view, digital market research is the ideal tool for competitive analysis. This allows a company to get thousands of opinions in a short amount of time, giving it an insight into its competitors.
II. A Guide to Competitive Analysis II
An analysis of competitors should be carried out with a clear understanding of what it should accomplish. This goal determines the procedure for the study.
Who are my most significant competitors? What makes consumers switch manufacturers? How do consumers perceive my marketing strategy compared to that of other companies? The questions are developed in response to the specific objectives of the analysis.
Following are examples of steps in a competitive analysis using digital market research. The purpose of using the hypothetical supermarket A is to illustrate what information can be obtained from consumer interviews.
To sell its products, supermarket A must be perceived as better than other supermarkets. It should, for instance, have a more selection, lower prices, and a better quality of fresh foods than other markets. A unique selling proposition - explaining why consumers shop exclusively at this store - will help it become more successful. Also, it should have more stores and a unique selling proposition.
A company needs to survey its customers to find out what they want and what makes them want to shop at a particular store. To keep my customers loyal, what do I have to offer? Are there things that other supermarkets provide that I don't, and what are my customers' chances to purchase from them? It is crucial to create a suitable questionnaire to answer all of these questions.
Step 1: Find out who are your top competitors
To begin a competitive analysis, it is essential to identify all the relevant competitors. The key competitors are those companies that offer products or services that appeal to the same or a very similar target audience as yours. Some suppliers trade in similar services and goods as your company, but some may enter the market in the future.
In our hypothetical supermarket A, we want to know how the market compares with other supermarkets. To conduct a competitive analysis, supermarket A must first determine which other supermarkets should be included. For this reason, a competitor analysis questionnaire should initially have questions about potential competitors.
In addition to which companies in particular industries consumers know, where they buy from, what products they purchase and which products they don't buy from, consumers should be asked to provide information on their purchasing behaviors. Another option would be to ask which company is closest to the customer's residence. As an alternative to asking consumers about specific brands and companies directly, you can ask them to name a few brands spontaneously, which can help assess how present a brand is within their minds.
For example, you can ask, “What are the names of the supermarkets that come to mind spontaneously when you think of them?”
What supermarket do you regularly shop at?
- Supermarket A
- Supermarket B
- Supermarket C
Step 2: Research, your competitors
For a competitive analysis to be effective, you have to specify what information you want to learn about your competitors. A consumer survey is an effective way to gather data that may not be obvious and only appear through strategic questions. Consumers might be interested in knowing why they choose a particular brand or supplier.
Another way to find out where your brand is famous is to ask if certain age groups seem to be attracted to a particular brand. Alternatively, you can ask how different advertisements of competitors are received compared to your own.
You could assess the appeal of a fictitious supermarket by either an open-ended question or by using multiple-choice questions. The advantage of open-ended questions is that they can reveal information that would not have been apparent otherwise.
What is it about this supermarket that you find appealing?
- Exceptional quality
- Most comprehensive selection
- Another reason, namely: ...
A supermarket could also test which advertising strategy consumers prefer as part of competitive analysis. Imagine, supermarket A maintains a social media presence on Facebook. Consumers can receive recipe tips, information about current offers, and customer service online. Marketer B, by contrast, makes use of YouTube to market its products. Supermarket A can now ask consumers which one they like better.
How appealing do you think it is when supermarkets have a social media presence?
- More likely yes
- Rather no
Step 3: Identify the strengths and weaknesses of your own company and those of your competitors
A competitive analysis must pinpoint the attributes that make the competition look strong and where any possible weaknesses may lie. The survey always includes your own company. Ultimately, it serves as a reference.
The first step to identifying the potential strengths of your competitors and identifying how your own company compares, is to determine what is most important for your target industry. According to supermarket A, staff friendliness, check out wait times, product quality and organic options are crucial. Following that, each topic can be queried separately.
Where can you find the friendliest staff in a supermarket?
- Supermarket A
- Supermarket B
- Supermarket C
- Other, which is ...
These kind of questions can be asked in a Boomerang survey. Boomerang Ideas allows for 1-3 questions with the option of up to 4 answers, it's very simple to use.
In addition, a similar method can be used to identify your own company's strengths and weaknesses compared to the competition. The weakness analysis clarifies what areas a company needs to improve to catch up with its competitors. For example, supermarket A could ask participants where they feel the checkout lines are the longest.
It's interesting to see if a particular selling point sets the company apart from others. Open questions are particularly effective in finding out this information.
“What is your opinion of supermarket A in comparison with other supermarkets? Please be as exact as possible!”
This exercise aims to isolate words that frequently appear, indicating what customers particularly appreciate about a particular company. The advantage of this kind can then be enhanced even more in the future to gain a significant advantage over the competition.
Some questions you could ask when conducting a competitive analysis are:
- Explain why you would switch telecommunications providers.
- Check out these five sneaker brands. What do you think is the best design in general, according to you?
- Which drugstore is closest to your house?
- Whenever you think of bakeries, what chain comes to mind?
- Why should you buy sportswear from a brand again?
- What has the detergent ad campaign been on your mind lately?
- What insurance provider would you trust most?
- Consider a modern café. How could it be better than others?
III. Analyzing the results
Digital market research allows consumers from all target groups to contribute thousands of thoughts, opinions, and evaluations all in a short amount of time. These elements are collected and form the competitive analysis. These results are crucial for future marketing and corporate strategies.
The advantage of digital market research is the large amount of data that can be collected at once. Demographic information, such as age, gender, place of residence, or educational level, is collected and stored together with the survey results at the beginning of the survey. These results provide novel insights that one might not know were there before.
For example, suppose they were to take up the example of supermarket A again. In that case, they might want to learn in retrospect which names of supermarkets spontaneously come to the minds of consumers in London and which supermarket chains are more familiar in Berlin.
The supermarket could also analyze the food stores visited by older people and the stores popular with 20 to 30-year-olds. Considering this target group could be the next step if they find, for example, that their store is not as popular as their competition among young people in Berlin.
As you can see, a competition analysis is incredibly insightful and extremely useful to stay innovative, get ahead of your competitors and meet the needs of your customers. Through the use of surveys and digital market research, you can to identify what your weaknesses are, your company’s strengths and better understand what your customers’ want. The best way to keep your company at the forefront of the market by exceeding your customers expectations and surpassing your competitors.
Photo by Markus Spiske on Unsplash